Market Structure

Stopped out, then watched the stock go on without you?

You read the trend right. You bought the breakout. You put your stop where the books said to put it. Then a normal dip took you out, and the stock went on to do what you expected, without you.

It is the most common loss in trading, and it is not a problem with your read. It is a problem with where the stop went.

Market structure is the oldest way to read a price chart: higher highs and higher lows, the break of structure that says a trend is going on, the change of character that says it is over. Every course teaches it. Almost no one checks it. This book did. It wrote thirteen of those teachings down as exact rules and counted what price did next on 3,399 American stocks across more than nine million trading days since 2002, including more than 1,600 companies that failed or disappeared.

The result is a map you can trust. Structure will not tell you where price is going. It will tell you where you are, where your stop belongs and how much to buy, and those three things are what keep money in your account.

What this book will help you do:

• Stop being shaken out of good trades. After 34,895 breakouts, a stop one ordinary day's range below the entry was hit about three times in four within a month. A stop three ranges away was hit less than one time in three, and made more for every dollar risked.
• Size every trade to its stop. A wider stop does not have to mean a bigger loss. Learn the simple arithmetic that keeps the dollars at risk the same on every trade.
• Name the trend on any chart. Up, down, range, or no trend yet. The rules and a trader's eye agreed on an uptrend about four times in five, and the book shows you what to do on the days they do not.
• Plan for a short trend. Half of all trends were over within 32 sessions. Take profits and move your stop with that in mind.
• Step aside when a trend breaks, and do not turn around. After a stock broke down through its structure, price rose over the next month in 22 years out of 25. Shorting the breakdown was the worst trade in the book.
• Measure a target before you trust it. A level one day's range away was reached about eight times in ten. A level four to six ranges away was reached about two times in ten. Distance decided it, not the name of the pattern.

Inside:

• Part I teaches market structure the way it is taught everywhere, clearly and fairly: swing highs and lows, trends, breaks of structure, changes of character, pullbacks, sweeps and ranges.
• Part II counts what price did, one teaching at a time, and ends every chapter on something to use or something to stop doing.
• Part III turns the findings into six rules and a seven-step routine you can run on any chart in a few minutes.

Written in plain English, with 43 charts and diagrams and every count printed in the back so you can check it yourself. No indicators, no jargon, no promises about where price is going.

For new traders learning to read a trend, and for experienced traders tired of being shaken out of good trades.

Part of the Reading the Chart Series. Each book stands alone, and they can be read in any order.